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By Shagun Sachdeva, Consumer Insights Analyst at GlobalData

The global dairy & soy food sector was valued at US$499.4 billion in 2018, of which 38.6% was generated by milk.Dairy & soy food with health & wellness attributes accounted for a 43% share of overall global sector sales in 2018, primarily driven by the demand for products which are perceived to be healthy and nutritious. Consumers’ growing desire to boost their nutritional intake of nutrients such as calcium and protein — as well as micronutrients such as vitamins and minerals available naturally in dairy products — was driving demand for dairy & soy food with health & wellness attributes.

Rising participation of women in the workforce, coupled with long working hours, is leaving consumers with less time to focus on nutrition. Dairy products are well positioned to capitalize on this consumer need due to their inherent health benefits and convenient formats. 

Some of the recent developments to look at:

• Consumers’ desire to minimize ecological damage by reducing household wastage is impacting product choices. Therefore, manufacturers, such as Danone Group, Nestlé SA, Unilever, and Arla are focusing on using biodegradable packaging for their dairy products.

• To draw consumers’ attention, dairy manufacturers are introducing products in new packaging formats, such as space-saving cheese pouches, which are also convenient to use. For instance, Food Union China launched flavored yogurt under the brand name Bravo Mama in 6x200ml bottles in a sleeve with plastic screw cap.

Asia-Pacific Dairy Industry 

Considering the regional dairy markets, Asia-Pacific represented the largest region for the sector with a value share of 29.3% in 2018, followed by Western Europe at 28.3%. in terms of growth.

Asia-Pacific (APAC) has undergone a significant transformation over the past decade and it continues to evolve. The region is home to more than half of world’s population, and is not only the fastest growing economic region in the world, but also holds highest nominal GDP and PPP at continent level. It is not just about China, Australia, Japan or India, but countries like Bangladesh, Myanmar, Philippines and Vietnam are showing its presence in one way or the other. The diversity in the economic situation is complementing each other and making it.

Robust economic growth and a large population base is driving the APAC’s Dairy and Milk beverage sector, which stood at US$62.9bn in 2018. The consumption of dairy in APAC region has historically been significantly higher than rest of the continents due to high consumption in India and China alone. Asia and Pacific combined consumed more than 64 billion kgs of dairy products in 2018, with Asia accounting for 95% of the consumption.

White milk, which is one of the core parts of daily diet in many of the APAC countries like India and Australia, forms a significant chunk of 62% of total dairy consumption in 2018. However, the proportion of white milk consumption has been declining in recent years due to increasing preference for value-added dairy products.  At the same time, the smaller and more volatile category, fermented milk, has been achieving higher rates as its popularity is fuelled by health-conscious purchasing choices.

The levels of dairy consumption in APAC were still far below Western standards, and signified massive growth opportunities to be exploited. While the regional consumption patterns may be different and cultural factors have a major role to play. In countries, such as India and Pakistan, the milk consumption is very much part of local traditions and the markets shows continuing trend of increased milk consumption. 

APAC region, undoubtedly, presents favourable long term consumer trends that provide a number of opportunities for the brands to look forward to. Changing consumer trends such as the growing demand for ‘better-for-you’ and ‘clean label’ products, rising popularity of ‘functional drinks’ and the growth in protein consumption will drive innovation in the dairy beverages sector. Dairy companies are taking advantage of this trend, with many adding extra protein and functional ingredients to their products.

Some of the latest developments in APAC Dairy Market

The region’s organized retail network has grown strongly, with companies expanding by acquiring local competitors. The market value of private label products increased from US$4,373.5 million in 2013 to US$5,516.7 million in 2018, growing at a CAGR of 4.8%

To attract millennial buyers, competitors are launching new brands or extending popular labels into the bustling ready-to-drink milk-based beverages market and positioning new products as healthy alternatives to cola beverages. Coca-Cola, Britannia, and Nestlé are among those to have stepped into the fray. For instance, in May 2019, Nestlé announced the launch of various organic products in the milk category in India.

Indian Dairy Market

Coming to Indian market, the Indian dairy & soy food sector ranked 13th on the GlobalData Opportunity Score and was valued at US$19,374.1 million in 2018 from US$13,859.5 million in 2013, registering a CAGR of 6.9% in US dollar terms during 2013–2018. The Indian dairy & soy food sector was dominated by the milk category, which accounted for the highest value share of 89.4% in 2018.Milk was the most fragmented category in the sector, with the top three companies accounting for a combined value share of 33.8% in 2018, offering opportunities for new companies. Meanwhile, the drinkable yogurt category had the highest consolidation at 93.2%, followed by the cheese category, with the top three companies accounting for a 87.5% share.

From health & wellness angle, Indian consumers are becoming more conscious about their dietary habits, seeking health & wellness benefits in dairy & soy food products in which they have strong habitual consumption. This is going to be a positive disruptor for the market as demand for healthier products emerges.

India is a lucrative destination for many international dairy players and high opportunities existed for these manufactures to be centered in India and capture the with innovative product launch.Product launches in the region fall under the familiar flavors, new formats trend with exciting new and creative ideas associated with the trend.

But, what led to the growth of dairy sector in India market? Right from sensory &indulgence to novelty and enjoyment gaining momentum leading to unique and exciting dairy products in the market. Keeping in the view of consumers shift towards novel flavors, has launched “Amul sterilized flavored standardized milk”. This vegetarian-friendly milk features a pina colada mocktailflavor. It is described as a rich and creamy milk with pineapple and coconut flavor.

Lactose intolerance is the growing concern among Indian consumers; despite being tolerant to the ingredients also consumers prefer ‘free-from’ dairy products. Health concerns can motivate consumers to avoid dairy products. Sana Vegan Products has introduced a soya paneer with added almonds, which they say is made using soybeans and almonds. The product is suggested to be good for lactoseintolerant people and consumers with heartrelated issues.

While everything seems like a bright spot in the market, how to remain relevant to the dairy consumers poses a potential challenge for the dairy industry, especially when younger generations are moving away from traditional dairy products due to health, environmental, and ethical concerns. 

The key point to note here is the market estimates and market factors at play will all be applicable when economies were not disrupted with Covid-19 pandemic.

Covid-19 Coronavirus Impact on the Dairy Sector

COVID-19 pandemic is expected to have a significant impact on the economy globally including economic slowdown, trade, supply chain disruption, commodities, and logistics.

While, we can only predict the impact of the pandemic on the demand for dairy for the short term, the uncertainty over the actual duration of the impact and the meaningful damage it can cause to consumption, which then affects processing, production and import is still unknown.

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